Texas Franchise Tax Exemption

STEPS TO EXEMPTION FROM TEXAS FRANCHISE AND SALES TAX

How can I get an exemption from Texas franchise tax for my non profit?

If your organization has been granted IRS 501c status, Texas will give you sales tax and franchise tax exemption. However, you can still apply for your TX tax exemptions without the federal exemption. Charitable non profits will deliver the completed Texas Application for Exemption-Charitable Organizations, AP-205 with a copy of your IRS determination letter, if you have one, to the Texas Comptroller of Public Accounts, Exempt Organizations Section. Also attach copies of your certificate of formation and bylaws.

Religious organizations use a separate form AP-209. Educational organizations apply with form AP-207. You will find the forms in your online account if you hire ‘Northwest’ as your TX registered agent.

Foreign non profit?

Foreign non profits looking for Texas tax exemptions must attach to the same application, their home state articles, certificate of good standing, bylaws and IRS letter if one exists.

Fees and Timeline:

There is no application fee.

The Exempt Organization Section will review your application and attached documents. A reviewer from the Section will call you within ten days to let you know the status of your application and whether additional information is needed.

The application is simple, convenient, free and covers both franchise tax and sales tax exemptions.

If your organization qualifies, you will be issued a tax exemption certificate. While your non profit in Texas will be exempt from paying sales tax on all purchases that are necessary to your exempt function, you still must collect tax on your sales.

Can Texas charities apply for property tax relief?

The charity must have 501c status and also Texas Franchise tax exemption first. Such a Texas charity files for property tax relief with application AP-199. Submit the form to the Texas Comptroller with your exemption determination letter from the IRS attached.  If you receive an approval certificate, attached it to Form 50-299, and deliver it to the local county tax assessor. The actual exemption will be granted or denied by the local official. You can find both forms on the Texas Comptroller website or in your ‘Northwest’ online account. There is no fee. You must reapply every year between January and the end of April.

Send your application to:

Texas Comptroller of Public Accounts
Exempt Organizations Section
P.O. Box 13528
Austin, TX 78711-3528

Questions?

Phone:  (512) 463-4600
Email:  [email protected]